Robinson–Patman Act
The Robinson–Patman Act of 1936 is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination. It was designed to protect small retail shops against competition from chain stores by fixing a minimum price for retail products.
The law grew out of practices in which chain stores were allowed to purchase goods at lower prices than other retailers. The amendment to the Clayton Antitrust Act prevented unfair price discrimination for the first time by requiring a seller to offer the same price terms to customers at a given level of trade. The Act provided for criminal penalties but contained a specific exemption for "cooperative associations".
Contents
In general, the Act prohibits sales that discriminate in price on the sale of goods to equally-situated distributors when the effect of such sales is to reduce competition. Price means net price and includes all compensation paid. The seller may not throw in additional goods or services. Injured parties or the US government may bring an action under the Act.Liability under section 2 of the Act may arise on sales that involve:
- discrimination in price;
- on at least two consummated sales;
- from the same seller;
- to two different purchasers;
- sales must cross state lines;
- sales must be contemporaneous;
- of "commodities" of like grade and quality;
- sold for "use, consumption, or resale" within the United States; and
- the effect may be "substantially to lessen competition or tend to create a monopoly in any line of commerce."
Defenses to the Act include cost justification and matching the price of a competitor. In practice, the "harm to competition" requirement often is the make-or-break point.
Sales to Military Exchanges and Commissaries are exempt from the act.
The United States Department of Justice and the Federal Trade Commission have joint responsibilities for enforcement of the antitrust laws. Though the FTC has some overlapping responsibilities with the Department of Justice, and although the Robinson–Patman Act is an amendment to the Clayton Act, the Robinson–Patman Act is not widely considered to be in the core area of the antitrust laws. The FTC is active in enforcement of the Robinson–Patman Act and the Department of Justice is not.
This act is one in a category of regulatory enactments that attempt to control price discriminations—or different prices for identical products. Similar prohibitions on discrimination have been found in specialized regulatory systems, such as those relating to transportation and communications.
Such statutes typically have exceptions or restrictions on range of application similar to those set out in the Robinson–Patman Act, to allow for differences in costs of output and distribution and differences in the degree of competition facing a vendor.
Early enforcement of the Robinson–Patman Act was difficult, and even today, it continues to be widely unenforced. That was in part because of its complexity, which limited consumers' ability to understand it. Even for consumers who had the education in antitrust law needed to understand the Robinson–Patman Act, it was unclear how its enforcement could benefit them.
In the late 1960s, in response to industry pressure, federal enforcement of the Robinson–Patman Act ceased for several years. Enforcement of the law was driven largely by private action of individual plaintiffs. This most likely led to a decrease in enforcement because of the difficulty individuals tend to have understanding the Act. In the mid-1970s, there was an unsuccessful attempt to repeal the Act. The Federal Trade Commission revived its use of the Act in the late 1980s, alleging discriminatory pricing against bookstores by publishers, but enforcement has declined again since the 1990s. On the other hand, over 20 states have price discrimination statutes similar to Robinson–Patman.
Notable cases
- In 1948, the Supreme Court upheld the Federal Trade Commission's enforcement of the Act in the landmark case Federal Trade Commission v. Morton Salt. The Commission found that Morton Salt violated the act when it sold its finest "Blue Label" salt, on a purportedly-standard quantity discount available to all customers but was really available only to five national chain stores that bought sufficient quantities of respondent's salt to obtain the discount price. According to the Court, "The legislative history of the Robinson-Patman Act makes it abundantly clear that Congress considered it to be an evil that a large buyer could secure a competitive advantage over a small buyer solely because of the large buyer's quantity purchasing ability."
- In 1976, a dozen Texaco retailers in Spokane, Washington who sued Texaco and won damages of $449,000, which were trebled under antitrust law. Texaco and other oil companies had made a practice of selling gasoline at one price to retailers and a lower price to wholesalers. When some wholesalers went into the retail business, they obtained gasoline for their retail stations at the wholesaler discount, resulting in unlawful price discrimination. The Supreme Court unanimously affirmed this decision in 1990.
- In 1994, the American Booksellers Association and independent bookstores filed a federal complaint in New York against Houghton Mifflin Company, Penguin USA, St. Martin's Press and others, alleging that defendants had violated the Robinson–Patman Act by offering "more advantageous promotional allowances and price discounts" to "certain large national chains and buying clubs." Later, complaints were filed against Random House and Putnam Berkley Group, and these cases also were later settled with the entry of similar consent decrees. Eventually, seven publishers entered consent decrees to stop predatory pricing, and Penguin paid $25 million to independent bookstores when it continued the illegal practices. In 1998, the ABA and 26 individual stores filed suit in Northern California against chain stores Barnes & Noble and Borders Group, which had reportedly pressured publishers into offering the price advantages.